Whether internships should be paid has been the topic of much debate. In 2006, guidelines were published by the former Department for Trade and Industry (now Business Innovation and Skills) for interns that work in the TV or media industry where internships are common place. The guidelines recommend that placements for interns should last for a maximum of 2 - 4 weeks and no more than 40 hours per week. It also suggests that specific learning activities should be identified at the beginning of any internship.

Again in 2007, the position of unpaid internships was raised as part of a government consultation but it was decided further legislation was not required.

Most recently, the government published a strategy document in April 2011 "Opening Doors, Breaking Barriers", the purpose of which is aimed at increasing social mobility. As part of its strategy, the government acknowledged that internships can provide valuable opportunities for young people to gain skills, and it is asking businesses "to offer internships openly and transparently and provide financial support to ensure fair access". It suggests that financial support "could consist of either payment of at least the appropriate national minimum wage rate, or alternatively payment of reasonable out of pocket expenses in compliance with national minimum wage law."

National Minimum Wage ("NMW")

The general rule is that the National Minimum Wage must be paid to "workers". If an intern is classified as a worker they are entitled to the NMW. There are a number of factors that can be determinative of "worker" status including:

• is there an obligation on the individual to perform the work and in return an obligation on the company to provide that individual with work? and/or
  
• is the individual rewarded, such as through pay or benefits in kind?

Should an Intern be Paid the NMW?

Case law seems to support the argument that interns should be paid the NMW. One of the first cases in this area was Vetta v London Dreams Motion Pictures Ltd in 2008 where a film production company engaged a self-employed production designer. The production designer needed an assistant and thus engaged an individual as an intern on an "expenses-only" basis, such expenses were paid by the company. The Employment Tribunal held that the intern was a worker as it was clear that "she carried out all of the tasks that one would have expected of an assistant in that position and should have been paid at least NMW. The Tribunal awarded Ms Vetta in excess of £2,000 for unpaid wages and accrued holiday pay.

In Keri Hudson v TPG Web Publishing Limited, a case decided this year, Ms Hudson succeeded in her claim that she was entitled to be paid wages and holiday pay. Ms Hudson was taken on as an unpaid intern for TPG Publishing Limited to work on the "My Village" website for six weeks. During her internship, Ms Hudson worked between 10 am and 6 pm and was responsible for a team of writers, scheduling articles and hiring new interns. Although she had no written contract of employment, she had discussions with the company that she would be paid which did not materialise. The Employment Tribunal held that these discussions taken together with the extent of the work Ms Hudson was undertaking was sufficient to show that there was an implied contractual relationship and Ms Hudson was a "worker". The Tribunal awarded Ms Hudson a total of £1024.98 for five weeks' pay broken down into £913.22 at the NMW rate for outstanding pay, and pro rata holiday pay of £111.76. However, TPG Web Publishing Limited intends to appeal the decision.

Further clarification on this practice would be welcomed, particularly for those industry sectors including media, TV and fashion where internships are popular. The Government have indicated, following their strategy document mentioned above, that guidance will be published although have not stated when such guidance will be available.

The employer's perception of internships is often at odds with the views of others. The National Union of Journalists ("NUJ") who supported Ms Hudson's case believe that internships are exploitative and a form of cheap labour for employers and has encouraged other interns in similar situations to contact them.

The result is that employers should be mindful of their obligations before taking on interns particularly since interns are now more likely, as a result of the much publicised Keri Hudson case, to be aware of their rights. It is doubtful that this decision will prevent employers from taking on interns all together but it should encourage them to at least consider the balance between training and "real work". The risk to an employer if an intern is doing "real work" that is of value to the employer will be a claim for NMW and holiday pay.

If you would like any further information on this area, please contact a member of the Employment Group.